The welfare state is unsustainable economically, socially and morally.

Wednesday, June 29, 2016

Household wealth inequality and family structure

On the back of statistics released yesterday there has been some grizzling about the top 10% increasing their share of household wealth. I am not about to argue with the data. My position is that the inequality is being substantially driven by change in family structure. Look at the data from the tables:

The median household wealth at June 2015 was $289,000.

One parent households with dependent child(ren) have a median household wealth of just $26,000 - less than a tenth of the median.

The wealthiest households are empty-nest couples or those with adult children living at home.

In the tiny cohort of my children's friends, more than half of their parents split at some point after their birth. It's a fairly middle-class sample. About half of the separated mothers have stayed single.

We live in world characterised by relationship instability yet expect or want the division of wealth to remain what it was when marriage was almost universal and divorce unusual.

The following graphs depict household incomes as opposed to wealth but they illustrate the point I am making. I compared household incomes from the 1966 census to those in the 2013 census and adjusted to $2013:

In 1966 far more families were clustered in the two middle income bands. There were fewer families at the extremes.

(While the 1966 data only comprised married families, just 4.3% of all families were excluded. They were predominantly widows. Even if those families were added to the lowest income bands, the bands' content would still be below 10%. In contrast, by 2013, 25 percent of families appeared in the lowest income bands.)

Yet the constant refrain is that growing inequality is the fault of factors beyond the individual's control.

I believe it's more a facet of personal choice. Don't get me wrong. I am all for personal choice. But there remains a distinction between good and bad choices, notwithstanding a 'bad' choice may be 'good' choice if you don't mind being poor. But don't then complain about it - personally or on somebody else's behalf - and blame a host of other factors like capitalism, unemployment, low wages etc.

The current levels of income inequality and wealth will continue to grow if people continue to choose to raise children alone or have children by multiple partners. Not all, but most, will end up at the wrong end of the income scale.

4 comments:

Wouldn't you think just one politician on either the left or the right of the spectrum would pick up this reality and run with it... just one? Could we please have just one?

Or are we facing the same problem as Britain and Europe and the USA and even Australia, where the elite political classes do not feel the need to represent the concerns of ordinary electors, or more particularly those who are picking up the tab for family breakdown and dysfunction, given that 40% of NZ 'households' pay no net tax at all. What happens when it's 50%? What chance do we have of reversing that trend?

Or are we facing the same problem as Britain and Europe and the USA and even Australia, where the elite political classes do not feel the need to represent the concerns of ordinary electors

You don't get it: you have it backwards. In Britain, the "elite political classes" are supported by the high-income earners and nett taxpayers - whether in the City or other cities or university towns - they are the ones voting to Remain in the EU, or for Hilary. It's your 40%ers or Mitt Romney's 47%ers, that is to say the family breakdown disfunction no-tax paying bludger class, who voted to Leave and who will vote for Trump (especially who voted Leave and then got upset there would be no more UK money for the NHS, and no more Euro money for their economically dead towns and remote useless counties).

The problem is a simple one: no representation without nett direct taxation. That formulation holds the solution, however: either for the whole parliament, or you have an upper house (a "fiscal council") that sets tax and spending levels and is voted on by those who deserve it, while social laws etc can be handled in a lower house of reps where everyone gets a vote. Don Brash argues strongly for this absolutely essential reform in his autobiography.

For the EU referendum, because it is so much related to tax and the economy, the 40% or 47% wouldn't get a say: the rest of the country would quite handily have voted to remain.

Pageviews past week

Comments policy

About Me

Lindsay Mitchell has been researching and commenting on welfare since 2001. Many of her articles have been published in mainstream media and she has appeared on radio,tv and before select committees discussing issues relating to welfare. Lindsay is also an artist who works under commission and exhibits at Wellington, New Zealand, galleries.